Health Care Reform Implementation Update November 7, 2014

Looming midterm elections have made the past several months difficult for Democrats and Republicans alike when it comes to the Affordable Care Act. With most of the midterm elections now wrapped up, lawmakers can turn their attention to concerns they have with the law. Even with control of both the House and the Senate, Republicans will not be able to repeal the entire Affordable Care Act. They may, however, push to repeal or improve parts of it when the new congressional session begins in January. We will be tracking health policy developments, as well as congressional leadership elections, closely and keep you posted. Also this week, while Americans were trick-or-treating and the country was in the midst of intense midterm re-election races, the Centers for Medicare & Medicaid Services (CMS) released final 2015 Medicare payment rules for physicians, hospital outpatient services, ambulatory surgical centers, dialysis providers and home health agencies, as well as some guidance on accountable care organizations, and the Small Business Health Option Program (SHOP) began allowing small businesses in five states to access some of its features before open enrollment begins on November 15.


CMS released final payment rules outlining how Medicare will pay major health care providers and suppliers in 2015, including home health agencies, physicians, hospital outpatient services, ambulatory surgical centers and end stage renal disease providers.

Under the physician fee schedule final rule, Medicare payments to physicians will be reduced by 21.2 percent after March of 2015, as required under the sustainable growth rate (SGR) formula. Legislation passed last April provided for no cuts to physician payments between January and March of 2015. Congress has repeatedly overturned cuts resulting from the SGR formula and in the final rule, CMS wrote that it will continue to work with Congress to fix this “untenable” situation. The rule also finalizes a separate chronic care management payment of $40.39 per month for physicians that manage care of beneficiaries with two or more chronic conditions. The agency also finalized a new process that will be fully implemented in 2017 that will allow for greater public comment prior to setting payment rates. Lastly, the agency finalized requirements related to its quality reporting initiatives.

Under the home health final rule, CMS finalized a 0.3 percent payment cut to home health agencies for 2015, an approximately $60 million reduction in payments. The rule also finalizes the elimination of the physician face-to-face narrative requirement, modifies therapy reassessment policies, formalizes the program integrity reform included in the proposed rule, and continues to implement ACA rebasing policy (though CMS notes that it plans to evaluate claims data for CY 2014 when it is available and will provide an update on the impact of these cuts).

Under the end stage renal disease (ESRD) final rule, CMS will increase overall payments to dialysis facilities by an average 0.3 percent for 2015. Separately, payments to hospital-based ESRD facilities are expected to increase by 0.5 percent, and payments to freestanding facilities will increase by 0.3 percent. The agency also finalized payment adjustments to durable medical equipment providers.

Under the outpatient payment final rule, CMS will increase overall payments by 2.2 percent for 2015. The agency also finalized plans for bundling payments for certain primary procedures and finalized payment rates for Part B outpatient drugs. For ambulatory surgical centers, payment rates will be increased under the ASC payment system by 1.4 percent. Finally, the rule establishes a process for CMS to recover overpayments made to Medicare Advantage and Medicare Part D plans.

After a yearlong delay, CMS launched the Small Business Health Options Program (SHOP) exchanges in five states. Small businesses in Delaware, Illinois, Missouri, New Jersey and Ohio now have early access to certain features of the online marketplaces, which will allow CMS to trouble shoot any problems before open enrollment begins on November 15. The SHOP is the federal program that allows companies with up to 50 workers negotiate better health insurance deals for their employees.

The Department of Health and Human Services Office of the Inspector General (OIG) released a report that found that current Medicare rules permit payments for prescriptions with dates of service within 32 days after a beneficiaries’ death. The rule cost CMS almost $300,000 in 2012 just on Medicare payments for HIV drugs of deceased beneficiaries. The number is likely significantly larger when analyzed across the entire Medicare Part D program. CMS agreed with the OIG’s recommendation that the rule be changed.

In other OIG news, the OIG’s fiscal year 2015 work plan indicates that it will conduct a risk assessment of Pioneer accountable care organizations, as well as a review of Medicaid managed care plans’ collection of prescription drug rebates from drug manufacturers.

The Medicaid and CHIP Payment and Access Commission (MACPAC), which is tasked with reviewing state and federal Medicaid and CHIP access and payment policies and making recommendations to Congress, the Secretary of HHS, and the states on a wide range of issues affecting these programs, held a public meeting on October 30 and 31. In this meeting, MACPAC focused on the current status of CHIP, behavioral health services in the Medicaid program, standards for access to care in Medicaid managed care, Medicaid provider payments, Medicaid primary care payment increase, and HHS reports on adult and child quality in Medicaid and CHIP.


A second firm hired to prepare the Republican House Leadership’s lawsuit against President Barack Obama announced on October 29 that they are no longer working on the case. Republican House Leadership was arguing President Obama has overstepped his constitutional authority, specifically in terms of his administration’s implementation of the Affordable Care Act. In response to this news, a spokesman for House Speaker John Boehner, Kevin Smith, revealed that the House is considering handling the legal preparation directly by using inside counsel.

Congresswoman Rosa DeLauro (D-Conn.) and Senator Richard Blumenthal (D-Conn.) participated in a telephone conference with the Medicare Rights Center on October 28 and promoted their bill, the Medicare Advantage Participant Bill of Rights Act. The legislation would prevent Medicare Advantage plans from dropping providers at will without cause. Currently Medicare Advantage plans may drop providers in the middle of the year, not just during open enrollment periods. The legislation would also require that Medicare Advantage plans finalize their provider networks within 60 days of the annual open enrollment period. The lawmakers plan to ask for a vote on the measure before the 113th Congress ends on December 31.


On October 27, the U.S. Attorney for the Southern District of New York filed a civil health care fraud lawsuit against Computer Sciences Corporation and the city of New York, alleging billing fraud. The government alleged that the two used computer programs to alter billing data to increase the payments the city received from the Medicaid program.


On October 31, Massachusetts announced that it will extend the state’s Medicaid waiver, which had expired this summer. The five-year waiver extension deal was struck between Massachusetts and the Department of Health and Human Services and is worth $41.4 billion. Of the $41.4 billion, $20 billion will be federal funding, and Massachusetts will pay the rest. The previous three-year waiver was only worth $26.75 billion, which annualized was about $640 million more per year than the new agreement provides. The agreement provides for care delivery transformation initiatives, improvements to Medicaid-eligible programs like homeless supports, substance abuse and rehabilitation and chronic disease interventions.

To view our compilation of recent health care reform implementation news, click here.

To view and search our library of Health Care Reform Implementation Updates, visit our Affordable Care Act Databook.

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